The $9 Trillion Housing Hole

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U.S. home values have dropped $9 Trillion since the housing market’s peak in 2006. That’s a pretty big number. That’s a 9 followed by twelve zeros. To put that figure in perspective, here are a few things that add up to less than $9 trillion:

  1. The combined Gross Domestic Products (GDP) for China and Germany ($8.3 trillion*)
  2. The combined GDP for the U.K., Italy, Brazil, Spain and India ($8.5 trillion*)
  3. Total money market funds ($2.836 trillion)

You get the point. The damage in 2010 was $1.7 trillion, which is a jump of 63% over the $1 trillion loss in value in 2009. Furthermore, it appears that we haven’t hit rock bottom yet. Economist Nouriel Roubini, a.k.a. Dr. Doom, famous for predicting the housing meltdown, sees the banks facing the possibility of an additional $1 trillion in housing losses.

In my mind, I flash back to 2006. Real estate was still booming; everyone was making money, spending frivolously. The theory that real estate values couldn’t go down was still a popular talking point. How naive. $9 trillion later, I think it’s fair to say that the theory has been fully debunked.

$9 trillion is such a cartoonishly large number though, that it almost distracts one from fully comprehending the suffering involved. Perhaps these numbers are a little more palatable. According to RealtyTrac, from December 2007 through June 2010, there have been 2.36 million foreclosures. During the same time, there were also 3.48 million default notices and 3.46 million scheduled foreclosure auctions.

These figures still don’t do justice to the human toll. Here in Phoenix, I vividly recall the suicide of local real estate magnate Scott Coles. I remember reading about Chicago real estate mogul Steven Good’s death. And I’m sure most caught the suicide of Bernie Madoff’s son this past week. These are just the high profile stories. There have been countless other tragedies that didn’t make the front page. Not to mention the families destroyed,  jobs lost and depression propagated.

I’m not trying to get too somber, just trying to reflect on the true costs of this $9 trillion mess. But not all was in vain. Lessons were learned, resolves were strengthened and perhaps some superficialities squashed. Collectively, I think we’ve come a long way in fully appreciating the little things in life as well as our relationships with friends and family. Yes, we have a large hole to dig our way out of, but we approach this task with an unprecedented level of sophistication.


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  1. 9 Trillion from what though? We talk as if it was all one way, but what was the housing market in 2002 – twice as long past? How about 1998? How about 1988?

    The point is that one could defensibly argue that the 9 trillion was inanity or was never really there in the first place. Sure, someone who entered the market in 2006 knew little else, but those older and wiser, or those in a position of regulatory responsibility, knew better.

    It is indeed a human tragedy that these recurrent speculative bubbles bring destruction on many, but it’s also frustrating that some don’t seem to learn, or choose to assign some mystical qualities to the obvious. Noone was forced to participate.

    I would like to think we’ve learned our lesson, but the obvious truth is that it will happen again, as sure as night follows day.

    • Anon,

      All excellent points. And I would also like to think we’ve learned our lesson as well, but history does have a habit of repeating itself. I guess the best we can do is remember the lessons learned and make sure we pass them on to anyone who will listen.


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